to purchase and hold a reasonable amount of coal lands not to exceed 1,000 acres. In 1825 the Pennsylvania legislature authorized the Delaware & Hudson Canal Company, which subsequently became the Delaware & Hudson Company, to purchase and hold quantities of lands situated at any place within 10 miles of the waters of Lackawaxen, not exceeding 5,000 acres. Although the number of acres of land which the railroad corporations could acquire was restricted in the early charters, it was enlarged by subsequent acts of the legislature. By purchasing the charter of the Hudson Coal Company in 1901 and taking title to coal lands it purchased subsequent to 1901 in the name of Hudson Coal Company, the Delaware & Hudson Company was enabled to greatly increase its holdings of anthracite coal producing lands.

Section 5 of Article XVII of the constitution of the state of Pennsylvania, adopted in the year 1873, provides as follows:

No incorporated company doing the business of a common carrier shall, directly or indirectly, prosecute or engage in mining or manufacturing articles for transportation over its works; nor shall such company, directly or indirectly, engage in any other business than that of common carriers, or hold or acquire lands, freehold or leasehold, directly or indirectly, except such as shall be necessary for carrying on its business; but any mining or manufacturing company may carry the products of its mines and manufactories on its railroad or canal not exceeding 50 miles in length.

It appears that the stocks of most of the large anthracite coal companies which are owned by the carriers respondents in this case were acquired by those carriers subsequent to the year 1873.

The mining, transportation, and to a considerable extent the selling operations necessary to market this commodity, though in a sense being each conducted under the name of separate corporate entities, are united under one management and control. As to most of these interests the carrier owns the entire capital stock of its allied coal companies. Another form of united control and management of mining, transportation, and selling operations is presented in the case of the Reading companies, the holding company being the owner of the entire capital stocks of the railway company and the coal company. The relations of the controlling carriers and the coal companies have not undergone any substantial changes since the effective date of the commodities clause' in the Hepburn act, May 1, 1908, with the exception that the shipping and marketing of the anthracite coal production of the Delaware, Lackawanna & Western

1 The commodity clause, section 1 of the Hepburn act, 34 Statutes at Large, 585: From and after May first, nineteen hundred and eight, it shall be unlawful for any railroad company to transport from any State, Territory, or the District of Columbia, to any other State, Territory, or the District of Columbia, or to any foreign country, any article or commodity, other than timber and the manufactured products thereof, manufactured, mined, or produced by it, or under its authority, or which it may own in whole or in part, or in which it may have any interest, direct or indirect, except such articles or commodities as may be necessary and intended for its use in the conduct of its business as a common carrier.

Railroad, the Delaware & Hudson Company, and the Lehigh Valley Coal Company are now performed by the Delaware, Lackawanna & Western Coal Company, the Hudson Coal Company, and the Lehigh Valley Coal Sales Company, respectively. These three coal companies assumed their present functions after the decision of the Supreme Court in March, 1909, in the Commodities cases, 213 U. S., 366, and the decision of the Supreme Court in the Lehigh Valley case, decided April 3, 1911, 220 U. S., 257. The evidence shows that the three coal companies were organized and financed without the interposition of outside interests or capital. The carriers provided them with the property and funds required to establish their shipping and selling business.

DELAWARE, LACKAWANNA & WESTERN RAILROAD COMPANY.

This carrier owns coal lands and conducts mining operations. Prior to August 1, 1909, it sold its own anthracite coal production in the markets. To rearrange its affairs in conformance with the decision of the United States Supreme Court, 213 U. S., 366, the carrier's officials caused to be organized the Delaware, Lackawanna & Western Coal Company. The carrier paid to its stockholders an extra dividend of 50 per cent-that is, $13,000,000-on its stock, in cash, and its stockholders were given the option to use part of the dividend so paid to purchase the capital stock, $6,500,000, of the Delaware, Lackawanna & Western Coal Company. Most of them availed themselves of this privilege. Under two contracts entered into between the coal company and the carrier under date of August 2, 1909, the coal company assumed and took over the selling operations which had theretofore been conducted by the carrier.

The carrier leased to the coal company all the retail trestles which it had theretofore used in its selling operations, and also its several coal storage plants. It also leased to the coal company its large lake trestle at Buffalo on Lake Erie, used for reshipping coal via the lakes. The carrier sold to the coal company all of the stocks of coal it then (July 31, 1909) had on hand at Chicago, Milwaukee, Toledo, and other western agencies and at various points on its railway lines. It is apparent from the record that this coal, approximately 630,000 gross tons, was sold by the carrier to the coal company at much less than its true and actual value. A large portion of the coal on hand at line points was sold to the coal company at $1 per ton of 2,240 pounds, which was less than the freight rate to the point at which it was on hand and was less than the f. o. b. mine selling price. The record also shows that the retail trestles were rented to the coal company at less than their true and actual rental value. An example of this is shown in the Buffalo properties. Five

retail trestles in the city of Buffalo valued at $185,000 were rented to the coal company for $48 a year.

The carrier conveyed to the coal company, which it caused to be organized, its established trade, its stocks of coal, its selling facilities, and the good will of its established business at much less than their true and actual value. The use of the properties leased, approximately 170 trestles, at the inadequate rental reserved in the lease has each year constituted a substantial concession to the coal company, an unlawful discrimination against competing shippers, and an offset against the freight rates paid to the carrier by the coal company.

Under the contracts between the carrier and the coal company the coal company is obligated to purchase from the carrier all of the anthracite coal which it sells and to purchase no coal from other sources without the written consent of the carrier, and to conduct the business of selling the coal in such manner as best conserves the interest of and preserves the good will and markets of the coal mined by the carrier. The only property owned by the coal company, excepting current assets, is property and fixtures valued at $169,070, and its annual sales of coal amount to approximately $35,000,000. On six months' notice the carrier can discontinue its contractual relations with the coal company and take over the stocks of coal the coal company has on hand.

Under such conditions the coal company is merely a dependency of the carrier, and the conduct of its business is subject to the arbitrary will of the carrier. The large business of the coal company can be terminated at any time the carrier sees fit to serve the prescribed six months notice. The president of the coal company is the carrier's vice president and is the head of the carrier's rate department, which is charged with the duty of establishing rates on anthracite coal shipped by competitors of the Delaware, Lackawanna & Western Coal Company. That the business of the coal company is absolutely dominated by the carrier is well illustrated in the appendix (p. 334), wherein it is shown in detail that although it could have shipped a large portion of its tonnage of anthracite coal to tidewater at the rates established by the Commission in the Marian case from the Taylor district, it elected to ship the coal from this district to other points and to ship coal to tidewater at the long established basis of tidewater rates, which were 25 cents a ton higher on the larger sizes of coal than the rates established as a result of our finding in the Marian case. If there was a bona fide divorcement of the business of carrier and shipper, it is inconceivable that the shipper would elect to pay the higher rate on the large tonnage of coal it ships to tidewater. Its shipments to tidewater at

the higher rate amounted to 100,000 tons in November and December, 1912.

LEHIGH VALLEY COAL SALES COMPANY.

At a meeting of the board of directors of the Lehigh Valley Railroad Company on January 11, 1912, the carrier's president was directed to inform the directors of the Lehigh Valley Coal Company that the carrier's directors requested that they consider the propriety of organizing a coal sales company. Accordingly the Lehigh Valley Coal Sales Company was organized and incorporated under the laws of the state of New Jersey. Its authorized capital stock was $10,000,000, of which $6,060,800, or 122,216 shares, was issued, and the remainder reserved for future needs. The privilege was accorded stockholders of the Lehigh Valley Railroad Company of subscribing to the stock of the coal sales company. The sales company formally commenced business on March 1, 1912. On February 26, 1912, the Lehigh Valley Railroad paid an extra dividend to its stockholders of 10 per cent on preferred stock, which amounted to $6,060,800, the exact par value of the stock issued by the coal sales company. A contract was entered into between the Lehigh Valley Coal Company and the coal sales company under which the latter accepted at the mines all of the coal production of the Lehigh Valley Coal Company, shipped it, and sold it in the markets. Here again, as in the Lackawanna arrangement, the carrier's treasury provided the capital required by the coal-selling company.

DELAWARE & HUDSON COMPANY.

We have herein before considered the limitations in the charter of the Delaware & Hudson Company as to the amount of coal lands it could acquire. On March 9, 1901, it purchased the charter of the Hudson Coal Company for $27,500. At that time the Hudson Coal Company owned no properties, and it was not an active corporation. Immediately thereafter the Delaware & Hudson Company advanced considerable funds to the Hudson Coal Company and accepted therefor debenture bonds, $1,500,000, issued by the coal company. In 1902 the Hudson Coal Company issued $1,850,000 of its 4 per cent bonds which were guaranteed principal and interest by the Delaware & Hudson Company. Immediately after the decision by the Supreme Court in the Commodities cases, 213 U. S., 366, in March, 1909, the Delaware & Hudson Company and the Hudson Coal Company entered into a contract whereby, commencing with the date July 1, 1909, the Hudson Coal Company took title at the pit mouth to the coal mined by the Delaware & Hudson Company, and thereafter it was sold in the market by the Hudson Coal Company. Prior to this time the Delaware & Hudson

Company had sold its own anthracite production. At the time this change was made there were large sums of money owing to the Delaware & Hudson Company from customers to whom it sold its coal. These unpaid accounts amounted to approximately $2,400,000. The accounts were transferred to the Hudson Coal Company, and in payment therefor, 18 months later, on February 1, 1911, the coal company issued its capital stock, $2,400,000, to the Delaware & Hudson Company. No stock was issued by the coal company prior to the date February 1, 1911.

FUEL COAL SOLD AT A LOW PRICE TO A SHIPPER.

How the alliance between the coal company and the carrier can be used to extend favors to large shippers is illustrated by a contract entered into by the Central Railroad Company of New Jersey and other parties under date of May 7, 1898, to remain effective for 20 years; that is, until the date April 30, 1918. This contract was between the Lehigh Coal & Navigation Company (owner of part of the railway lines operated by the Central Railroad Company of New Jersey), the Central Railroad Company of New Jersey, and the Lehigh & Wilkes-Barre Coal Company, parties of the first part, and the Lehigh Zinc & Iron Company and the New Jersey Zinc Company, parties of the second part. Under the conditions of this contract the two coal companies supply the New Jersey Zinc Company, an interstate shipper, with large quantities of fuel coal at much less than its market selling price in recent years.

The parties of the first part were desirous of having the zinc companies' proposed new plant located on the Lehigh & Susquehanna branch of the Central Railroad of New Jersey, and accordingly a contract was entered into between the parties named whereby the two coal companies became obligated to furnish the zinc companies each year with a large quantity of fuel coal, No. 2 buckwheat anthracite, delivered at the zinc companies' plant at Hazard, Pa. (Palmerton, Pa.), the selling price being 55 cents per ton on such coal shipped from the Lehigh region and 75 cents per ton on such coal shipped from the Wyoming region. The plant was constructed at Hazard, and in accordance with the contract it is supplied with 200,000 tons of fuel coal annually. The standard selling price of this coal f. o. b. mines ranged from 70 cents to $1.15 per ton of 2,240 pounds during the year 1911, and from 70 cents to $1.12 per ton during the year 1912, and the intrastate freight rate to the zinc companies' plant from the mines in the Wyoming region was 75 cents per ton of 2,240 pounds and from the mines in the Lehigh region was 60 cents per The carrier has transported this coal at a rate of 293 cents per ton. It can be readily observed that under this contract the zinc companies are deriving an advantage of $1 per ton on 200,000 tons of fuel coal annually.

ton.